Financial Services Regulation and Compliance - Cross Sectoral and Other August 2023
Financial Services Regulation and Compliance - Cross Sectoral and Other August 2023
CBI updates Fitness and Probity Interview Guide
On 9 August 2023, the CBI published an updated Fitness and Probity Interview Guide (the Guide). The main amendments to the Guide are:
1. Inclusion of an interpretation section
This section has been introduced to define several terms used throughout the Guide. It includes the following definitions: firm, PCF, PCF applicant, proposing firm and the Central Bank Reform Act 2010 as amended.
2. Use of information and the importance of full disclosure
This new section states that the CBI may use information it gathers during its assessment of an applicant’s fitness and probity for any of the CBI’s other functions, including those functions that are not directly related to an applicant's fitness and probity. Any information that is discussed or disclosed during the interview process may be shared with both the PCF applicant and the firm as part of the assessment.
The Guide also states that the CBI may use information gathered from other functions to assess the applicant's fitness and probity.
In addition, the PCF applicant must have shared any relevant information with the proposing firm in advance of the application.
This new section also specifies that due diligence of the information provided to the CBI must be carried out in line with Section 5 of the CBI Individual Questionnaire Guidance, Application and PCF Roles Guidance and the Dear CEO Letter on Thematic Inspections of Compliance by RFSPs with their Obligations under the Fitness and Probity Regime issued on 17 November 2022.
3. Updated answer to "Will the interview be recorded?"
The Guide has now been amended to confirm that while assessment interviews will not be recorded, instead a minute taker will keep a note of the main points from the interview which will be kept for internal purposes. The previous guide stated that the interview note would be kept for "internal purposes only", however the word 'only' has now been removed
4. Updated answer to “Can I bring a legal representative with me?"
The Guide removes the option for 'any other representative' to accompany PCF applicants to Specific Interviews. The Guide now states that only a legal representative will be allowed to accompany them.
5. Removal of COVID-19 section.
The COVID-19 section has now been removed which was previously included in Appendix 2 of the Guide.
Department of Finance consults on operation of Ireland’s discretions under MiCA
On 9 August 2023, the Department of Finance opened a public consultation on the operation of Ireland's discretions under the MiCA. The four national discretions the Department seeks feedback are:
1. Article 88 (1): Public disclosure of inside information
Article 88(2) of MiCA allows in certain circumstances, issuers, offerors or persons seeking admission to trading of crypto-assets to delay public disclosure of inside information in certain circumstances. Article 88(3) provides that where such a delay has taken place such an individual is required to inform the relevant national competent authority (NCA) of the delay and provide a written explanation. Article 88(3) also contains a discretion which allows Member States to provide that a record of such an explanation should be provided only upon the request of the NCA.
2. Article 111 (2): Administrative penalties and other administrative measures
Article 111(1) of MiCA allows Member States to provide NCAs with the power to take appropriate administrative penalties and other measures in relation to a number of infringements. Member States are also entitled to supplement the NCA's supervisory powers under Article 112(2) and (5) and allow them to impose higher levels of penalties than those provided for in MiCA. However, the discretion relates to Member State not providing administrative penalties where the associated infringement is already subject of criminal sanction under national law.
3. Article 143 (2): MiCA transition period
Article 143 of MiCA provides a transition period for crypto-asset service providers (CASPs) that are already providing services in accordance with national law, prior to MICA’s applicability. The transition period allows CASPs to continue providing services for up to 18 months after MiCA’s date of application or until they have been granted or refused authorisation.
While the default position in MiCA is that CASPs can avail of a transition period, MiCA allows each Member State a discretion to decide to either not apply the transition period or reduce its duration in circumstances where the Member State considers its national regulatory framework is less strict than that of MiCA.
Article 143(6) provides that Member States may adopt a simplified procedure for authorisation applications submitted between 30th December 2024 (MiCA applicability) and June 2026. This discretion will allow Member States to leverage information already gathered which would in turn simply the procedure and potentially shorten the MiCA authorisation procedure.
The consultation will close on 15 September 2023. Most sections of MiCA will take effect from 30 December 2024.
The CCPC publishes its 2022 Annual Report
On 18 August 2023, the Competition and Consumer Protection Commission (CCPC) published its 2022 Annual Report (the Report). The following are some key observations from the Report:
During 2022, the CPCC made 70 merger notifications which included 6 banking merger determinations. The Report highlighted two merger notifications that were cleared which contained commitments to address competition concerns (Synch Payment Joint Venture (AIB, Bank of Ireland, PTSB) and Bank of Ireland/Certain Assets of KBC).
The CCPC published three explainer cryptocurrency videos on their website covering ‘understanding crypto’, ‘volatility in crypto’ and ‘crypto scams’.
As part of the commencement of the Consumer Rights Act 2022 and the Amending Product Pricing Regulations, the CCPC published 7 guidelines and sent reminders to businesses with information to assist them with complying the new requirements under the new legislation.
The CCPC provided a submission to the Department of Finance Retail Banking Review and provided initial views to the CBI in advance of the planned review of the CBI Consumer Protection Code in 2023 recommending that the CBI review its switching code.
Department of Finance launches national financial literacy strategy stakeholder survey
On 9 August 2023, the Department of Finance launched a survey open to all stakeholders on their current activities in financial literacy and education, as well as their views on the future shape of a national strategy for financial literacy. This is part of a broader mapping exercise that marks the first stage of the development of Ireland’s first national financial literacy strategy.
The survey will close on 15 September 2023.
EBA report on the functioning of anti-money laundering and countering the financing of terrorism colleges in 2022
On 10 August 2023, the EBA published a report on the functioning of anti-money laundering and countering the financing of terrorism colleges in 2022. The report recognises that competent authorities have taken important steps to make anti-money laundering and countering the financing of terrorism (AML/CFT) colleges useful and effective. This includes:
A more structured approach to organising the meetings of colleges, contributing to the exchange of more substantive, actionable information, than was previously the case.
Active participation by prudential supervisors and Financial Intelligence Units (FIUs) in most AML/CFT colleges to which they had been invited.
Enhanced quality of discussion in several colleges, with the lead supervisor leading these discussions much more effectively.
The report also notes that none of the action points identified in the 2022 report have been addressed fully. The number of third country observers, for instance, remains very low. The EBA also notes that several lead supervisors have not adjusted the nature and frequency of meetings based on the AML / CFT risks to which the financial institution has been exposed.
The 2022 action points therefore remain relevant.
ESMA Chair comments on MiCA in interview
On 16 August 2023, the ECB Banking Supervision Newsletter published an interview with Verena Ross, Chair of the ESMA. Ms. Ross commented on the impact the recent banking troubles had on credit default swaps (CDS) and called for more transparency on CDS.
On the introduction of MiCA, Ms Ross noted that while the framework is intended to increase consumer protection by providing consumers with information on crypto products and associated risks, she warned that 'there will be no such thing as a safe crypto asset”.
ESMA updates European Crowdfunding Service Providers for Business Regularion (ECSPR) Q&As
On 3 August 2023, ESMA updated its Q&As on the ECSPR. The most significant clarification is that the period referred to in Article 1(2) of the Regulation commences 12 months prior to the date of launch of the crowdfunding offer (Answer 3.15). Additionally, the threshold referred to in point (c) of Article 1(2) of the Regulation does apply when a crowdfunding offer is made on several crowdfunding platforms.
The Q&A clarifies that a crowdfunding service provider (CSP) may offer other services and the Regulation does not restrict the possibility for a CSP to engage in other regulated activity pursuant to relevant applicable Union or national law.
The Q&A clarifies that a CSP must at all times meet the conditions for authorisation and that any material changes to the information provided in the application for authorisation must be notified to the competent authority without undue delay.
Finally, the Q&A clarifies that a legal person cannot be appointed responsible for the management of a CSP.
European Commission consults on draft implementing regulation relating to minimum requirements for content and format of climate neutrality plans under the Emissions Trading Scheme (ETS)
On 4 August 2023, the European Commission published a consultation on a draft implementing regulation relating to minimum requirements for the content and format of climate-neutrality plans, for use in the context of conditional and additional free allocation under the ETS. The ETS Directive was revised to align with the EU’s “Fit for 55” package in reducing net greenhouse gas emissions by 55% by 2030.
The consultation period closes on 1 September 2023.
Vietnam and Cambodia added to list of high risk third countries
On 18 August 2023, the European Commission designated Vietnam and Cambodia as third-country jurisdictions with strategic deficiencies in their AML/CFT regimes that pose significant threats to the financial system of the EU. This follows Vietnam and Cambodia being added to the Financial Action Task Force's list of jurisdictions under increased monitoring in June 2023. Obliged entities will be required to apply enhanced customer due diligence to business relationships or transactions involving the jurisdictions.
The Delegated Regulation will now be subject to a period of scrutiny by the European Parliament and Council. If no objection has been raised at the conclusion of this period, it will enter into force.
Sanctions imposed in repose to the crisis in Ukraine
The EU has imposed a range of sanctions on the Russian Federation since February 2023 in response to its military aggression against Ukraine. The most recent sanctions package (the Eleventh Package) was issued in June 2023, focussing on the enforcement and implementation of existing measures. On 20 July 2023, the Council decided to renew sanctions over Russia’s military aggression for a further six months, until 31 January 2024. The CBI is publishing details of new restrictive measures / sanctions, as well as any associated EU/UN guidance, on a dedicated webpage as the situation continues to evolve.